Television

There was a notable development in the Diamond Sports Group bankruptcy saga this evening. The court ruled in Major League Baseball’s favor on yesterday’s hearing regarding Diamond’s efforts to restructure a number of its local broadcasting deals.

The broadcasting conglomerate has temporarily been paying reduced rights fees (75%, according to Alden González of ESPN) to the Twins, Guardians, Diamondbacks, Reds and Rangers since filing for bankruptcy two and a half months ago. Diamond had sought a ruling that’d require the team to renegotiate their broadcasting contracts to more accurately align with the current market value of broadcasting rights — which has dropped sharply in recent years due to the rise of cord-cutting, contributing to Diamond’s bankruptcy filing.

That argument wasn’t persuasive to the court, which concluded that a change in the market “doesn’t mean the contract price is clearly unreasonable” (relayed by Evan Drellich of the Athletic). As a result, Diamond is now responsible for backpay to the five organizations it had been paying the reduced rate. According to González, the court hasn’t yet set the deadline for those payments. If Diamond fails to meet its responsibilities by whatever dates are ultimately chosen, MLB would have the ability to reclaim the broadcasting rights for those clubs from the Bally networks.

“MLB appreciates the ruling from the federal bankruptcy court in Houston requiring Diamond to pay the full contractual rate to clubs,” the league said in a statement relayed by González. “As always, we hope Diamond will continue to broadcast games and meet its contractual obligations to clubs.”

Diamond carried broadcasts for 14 major league teams entering the season. It forfeited the ability to carry Padres’ games earlier this week by opting not to meet a scheduled payment in that contract. MLB promptly took over in-market broadcasting and is making those games available both for streaming on MLB.TV and via other cable platforms. The league reiterated this evening it is prepared to do so for any other contracts which Diamond lets lapse. Today’s ruling increases the odds of Diamond abandoning other deals, though the corporation hasn’t announced any immediate plans to do so.

Diamond Sports Group, the corporation which owns the Bally Sports regional sports networks, officially filed for Chapter 11 bankruptcy in the Southern District of Texas this afternoon. The company announced the news in a press release.

Josh Kosman of the New York Post reported yesterday that Diamond was planning to file for bankruptcy. That was expected to officially occur on Friday, but the process has evidently been accelerated a few days.

“The DSG Board of Managers has been evaluating strategic opportunities with the support of its advisors and in coordination with creditors to position the Company for long term success and has determined that the best path forward for the Company and its stakeholders is to restructure through a Chapter 11 process,” said CEO David Preschlack. “We are utilizing this process to reset our capital structure and strengthen our balance sheet through the elimination of approximately $8 billion of debt.”

The most notable development for fans of teams whose local broadcasting deals are carried through Bally is that the company confirmed the RSN “will continue to operate in the ordinary course during the Chapter 11 process.” The corporation added it has approximately $425MM in cash to fund the business during its restructure.

Diamond is responsible for local broadcasts for 14 major league teams*. Kosman reported yesterday that Diamond would try to restructure its deals with some of the clubs but was planning to entirely reject its contracts with the Diamondbacks, Padres, Guardians and Reds. (Diamond didn’t provide any specifics on its planned course of action in today’s release.)

According to the Post, MLB is planning to step up for teams whose contracts are abandoned and stream them in-market for free while the league searches for alternatives. There’ll surely be more developments over the coming weeks and months, but the long-anticipated bankruptcy for the fledgling RSN corporation has officially been set in motion.

* The Angels, Braves, Brewers, Cardinals, Diamondbacks, Guardians, Marlins, Padres, Rangers, Rays, Reds, Royals, Tigers, and Twins are all broadcast by Bally.

Major League Baseball announced this week that it has hired a trio of executives with experience at Bally Sports and AT&T SportsNet to its newly created Local Media department. Doug Johnson has been named senior vice president and executive producer of the department. Greg Pennell joins MLB as their new senior vice president of local media. Kendall Burgess has been named the department’s vice president of technical operations.

“These new hires are an important step in our preparation to address the changing landscape of MLB game distribution in light of the increasing challenges and pressure facing regional sports networks,” MLB chief revenue officer Noah Garden said in a statement within the league’s press release. “The decades of experience and expertise in game production and operations that Doug, Greg, and Kendall bring to Major League Baseball reinforces our commitment to deliver the highest quality game telecasts to our fans.”

Previously, Johnson has spent 16 years at AT&T SportsNet, managing remote and studio productions in addition to overseeing day-to-day and long-term planning of 250-plus annual events. He’ll oversee all games locally produced by MLB. Pennell comes to MLB from Bally, where he oversaw day-to-day financial operations. He’ll handle production operations of all local MLB telecasts, per the league’s release. Burgess, too, was previously with Bally, where she held the same title and provided direction for Bally’s 19 RSNs as they produced more than 4,500 annual sporting events.

All three of the new hires will report to department head Billy Chambers, a former FOX Sports exec whom MLB hired one month ago to lead the fledgling department. The very creation of MLB’s new local media department is reflective of the turmoil currently being felt throughout the RSN industry — a model that appears to be rapidly dying in a content market dominated by streaming services.

Whether things escalate to that point is dependent on the increasingly grim outlook of the two major corporations behind the RSN model. Diamond Sports Group — the corporation that owns the Bally Sports RSNs which broadcast the Angels, Braves, Brewers, Cardinals, Diamondbacks, Guardians, Marlins, Padres, Rangers, Rays, Reds, Royals, Tigers  and Twins — has fewer than 30 days to pay off debts or default on those commitments after recently forgoing more than $140MM of payment to creditors.

There’s similar uncertainty regarding AT&T SportsNet, which is owned by Warner Bros Discovery. Last week, WBD announced its intent to withdraw from the RSN model, leaving the broadcast situation uncertain for the Astros, Rockies and Pirates. Per Sports Business Journal’s John Ourand, WBD gave those teams a March 31 deadline to reacquire broadcasting rights before those RSNs file for chapter 7 liquidation. MLB’s Opening Day, of course, is set for March 30.

The Mariners also broadcast games via an AT&T SportsNet affiliate, but as Geoff Baker of the Seattle Times wrote last week, they’re not affected by WBD’s withdrawal from the RSN business due to the fact that the team owns the majority stake in the ROOT Sports Northwest network. Network president Patrick Crumb told Baker that as far as the Mariners are concerned, it’s a “steady state” and “business as usual” for them.

Commissioner Rob Manfred has already gone on the record to state that MLB has the capacity to and is prepared to take over in-market broadcasting, should it ultimately be deemed necessary. The creation of a local media department and the hiring of three seasoned, high-ranking RSN executives meshes with Manfred’s comments about the league’s preparedness to overtake broadcasting responsibilities, if (or when) necessary. Exact permutations of how that might look are surely still being discussed. Rangers owner Ray Davis chatted with Evan Grant of the Dallas Morning News about that very topic yesterday, expressing obvious concern in the short-term while simultaneously voicing optimism that the looming paradigm shift could lead to a larger number of providers broadcasting games and the eventual elimination of a lot of the blackout issues that have been chief among fans’ complaints for years.

Diamond Sports Group, the corporation which owns the Bally Sports networks responsible for local broadcasts of a number of MLB teams, forewent interest payments worth roughly $140MM to creditors last Wednesday (Associated Press link). The decision kicked off a 30-day window for Diamond to determine whether it is capable of meeting its debt obligations or is going to default on its commitments.

The missed payment came as no surprise, with various reports noting Diamond’s rough financial situation for months. Should the corporation default and potentially file for bankruptcy, it’d likely have a few options: honor its existing contractual commitments, withdraw from the deals, or attempt to renegotiate its contracts at more manageable rates. Diamond has separate broadcasting deals with all 14 MLB clubs* with which it has contracts; renegotiations, if things come to that, would be at a team-by-team level rather than in any kind of package deal.

There’s still plenty to be determined about the company’s next steps. Its precarious financial position places a great deal of uncertainty about the stability of local TV rights for the clubs that have contracts with Diamond, however. Commissioner Rob Manfred addressed the situation at last week’s owners meetings, noting that the league is exploring alternatives to make sure those teams don’t lose in-market broadcasting (link via Alden Gonzalez of ESPN).

“Obviously, our first choice would be that Diamond pay the clubs what they’re contractually obligated to pay them, but because I guess I’m a contingency planner by nature, we are prepared no matter what happens with respect to Diamond to make sure that games are available to fans in their local markets,” Manfred said. “We think it will be both linear in the traditional cable bundle and digitally on our own platforms, but that remains to be seen. … Our first hope is that Diamond figures out a way to pay the clubs and broadcast the games like they’re contractually obligated to do.”

The league makes most out-of-market games available to subscribers to its MLB TV package. However, clubs’ local broadcasting deals supersede the league platform, leading to blackouts of in-market games on MLB TV. Manfred broadly indicated a desire to eventually permit MLB TV consumers to purchase various broadcasts both within and out of market (via Hannah Keyser of Yahoo! Sports), though that certainly won’t happen on a league-wide level anytime soon.

MLB has already branched out into various streaming deals. The league agreed to contracts with Apple and NBC for broadcasting arrangements on those companies’ respective streaming services last year. It certainly wouldn’t be a surprise to see MLB negotiate similar deals with other platforms over coming seasons. Those contracts — paired with various postseason TV deals, including a new broadcasting contract with ESPN tied to the creation of the Wild Card round in the most recent CBA — highlight the kind of national revenue bases the league will certainly continue to explore outside the realm of local broadcasting. Nevertheless, the uncertainty with Diamond is sure to be an area of concern within the league office over the coming months.

Diamond first purchased various regional sports networks, which had been under the Fox Sports moniker, from Disney in 2019. The company reportedly took on roughly $8 billion in debt to facilitate that transaction. As Travis Sawchik of The Score explored last month, rates of cable ownership have dropped precipitously over the past couple years, contributing to Diamond’s revenues falling short of its expectations. Declining cable rates are generally expected to continue in the future given the ongoing rise of various streaming platforms.

Concerns about a potential default have raised questions about the player payrolls for the teams that rely on local broadcasting fees from Diamond. It’s still too early in the process for clubs to have a firm idea if/how Diamond’s situation will affect player spending, though it’s something those organizations are surely monitoring.

Cardinals’ chairman Bill DeWitt Jr. addressed the situation shortly before Diamond failed to make its February 15 interest payment, for instance. “It’s a concern and a fluid situation, there’s no question about it,” he said last week (link via Derrick Goold of the St. Louis Post-Dispatch). “Something is going to happen sooner rather than later. It’s a big part of our revenue stream. We have nice rights fees. The (RSN) model is at risk. We’re operating like, no, it’s going to stay, but the reality is there’s going to be change.”

The situation has led to concerns about the possibility of a lowered salary cap in both the NHL and NBA. Those leagues, which have player spending fixed to league revenues as part of their respective collective bargaining agreements, each have a number of clubs with broadcasting agreements with Diamond. MLB, of course, has no salary cap. The MLB Players Association has steadfastly resisted any hard limitations on team spending throughout past CBA negotiations.

Questions about a potential league push for a cap arose again over the weekend. MLB created an Economic Reform Committee, which the commissioner indicated was in response to both this ongoing local TV uncertainty and more longstanding concern about revenue disparities between franchises. There’s little chance of the MLBPA entertaining a cap during the next round of collective bargaining negotiations in 2026, however. That would’ve been true regardless of the status of local RSN contracts but seems apparent as ever in light of the questions facing those cap leagues.

* The Angels, Braves, Brewers, Cardinals, Diamondbacks, Guardians, Marlins, Padres, Rangers, Rays, Reds, Royals, Tigers, and Twins are all broadcast by Bally.